Exxon and Mobil - is bigger really better?

Is bigger better? Despite the efforts of PR professionals at both companies to frame the Exxon and Mobil merger as a bigger 'opportunity', the media spin indicates that the public hasn't fully accepted this argument quite yet. The general conclusion was that the merger would allow the combined company to cut costs and increase profits, but at a cost to workers and possibly consumers.

Is bigger better? Despite the efforts of PR professionals at both companies to frame the Exxon and Mobil merger as a bigger 'opportunity', the media spin indicates that the public hasn't fully accepted this argument quite yet. The general conclusion was that the merger would allow the combined company to cut costs and increase profits, but at a cost to workers and possibly consumers.

At least the PR experts successfully led the story as most of the coverage included commentary and insight from Lee Raymond, chairman of Exxon, and Lucio Noto, chairman of Mobil. The two executives held a 'hastily arranged' press conference on December 1 to announce the merger.

There were two schools of thought on why the companies were merging.

The most prominent opinion was that it was a strategic move to maintain profits and compete globally. Low oil prices and other big mergers in the oil industry were cited frequently as justifications for the deal.

However, reports that the companies were acting out of desperation surfaced.

Noto's attempt to refute this notion appeared in a number of articles 'This is not a combination based on desperation. It is one based on opportunity,' he said. He continued, 'But we need to face some facts. The world has changed. The easy things are behind us.' (e.g. Los Angeles Times, December 2) Unfortunately for Noto, the latter part of his statement often appeared alone in reports.

Significant commentary emerged from consumers and advocates who believed that this merger would reduce competition and lead to higher gas prices.

However, others asserted that the combined company did not pose a monopoly threat and claimed the deal would actually be good for consumers.

While the merger was not highlighted as a major threat to competition, reports noted that the companies would likely be forced by regulators to sell some of their assets first. Raymond was frequently quoted saying, 'We would be amazed, although pleasantly surprised, if the (FTC) did not want us to divest some of our assets.' (e.g. USA Today, December 2) This quote seemed to effectively communicate the companies' willingness to work with regulators and may have diminished monopoly fears.

The most frequently cited downside to the deal was the projected job loss. Nearly all of the articles noted that at least 9,000 jobs would be cut. Moreover, a handful of articles reported that analysts expected the figure to be significantly higher.

To the benefit of Exxon and Mobil, the media reported that the merger will enhance their profitability. However, there was also a focus on the potential downsides of this merger, most notably job cuts and decreased competition. The next step for Exxon and Mobil should be to explain how this merger will impact consumers' future trips to the gas station.

Evaluation and analysis by CARMA International. Media Watch can be found at www.carma.com.